The IPO Buzz: The Waiting Game

There is no question that today’s economic outlook is terrible and 2008’s stock market suffered its sharpest annual sell-off since 1931. That’s the bad news. Now for the good news.

On Jan. 6, 2009, two of the three major stock market indexes edged back into bull market territory. The Nasdaq Composite Index closed at 1,652.38, UP 25.5 percent from 1,316.12, its recent closing low on Nov. 20, 2008, and the S&P 500 closed on Jan. 6 at 934.70, UP 24.2 percent from 752.44, its recent closing low, also on Nov. 20.

Last week’s retreat took both indexes below the 20 percent recovery level. But who’s to say last year’s closing lows don’t belong in the rear-view mirror?

The IPO Market

It’s an established fact that the IPO calendar needs the winds of a bull market at its back to flourish. And the reverse is true. A bear market will kill the calendar. As an example, let’s take the recent bear market. From previous highs (October 2007) to recent lows (November 2008), the Dow Jones Industrial Average lost 46.7 percent, the Nasdaq lost 54 percent and the S&P 500 lost 51.9 percent. And the IPO market dried up in the wake.

Fast forward to the present: The major stock market indexes have staged a sharp recovery over the last two-and-a-half months and, should the rally continue, it’s only a matter of time before IPOs kick back into play. The stage has already been set.

Currently, the IPO pipeline has 158 companies in registration looking to raise $23.6 billion, according to the U.S. Securities and Exchange Commission’s filings. Of those numbers, 82 are SPACS looking to raise $13.6 billion.

That’s better than a year ago. On Dec. 31, 2007, the IPO pipeline had 120 companies in registration looking to raise $23.9 billion. Of those numbers, 51 were SPACS looking to raise $9.1 billion.

And when these deals start being priced, bankers could well offer them at sharp discounts to get them done. There could be some snap, crackle and pop in the aftermarket.

The Seasonal Factor

At the beginning of the year, the IPO calendar usually does not come to life until mid- to late January. IPOScoop’s records date back over the last 11 years, so let’s take a look at this time span.

Since 1998, seven of the 11 years saw the IPO curtain raiser come during the two-week period from Jan. 14 through Jan. 28.

The earliest pricing was the IPO of K-Sea Transportation Partners (NYSE: KSP), an East Brunswick, New Jersey-based provider of marine transportation, distribution and logistics services for refined petroleum products.

On Jan. 8, 2004, K-Sea priced 3.6 million shares at $23.50 each. The stock traded as high as $48.50 per share on July 12, 2007, but closed on Friday, Jan. 9, 2009, at $16.77, DOWN 28.6 percent from its initial offering price.

Bankers went on to price five IPOs in January 2004 and 248 for the full year.

The latest pricing was the IPO of Bancshares of Florida (Nasdaq: BOFL), a Naples, Florida-based bank holding company.

On February 11, 2003, Bancshares of Florida priced 900,000 shares at $10 each. The stock traded as high as $24.50 per share on Dec. 7, 2005, and closed on Friday, Jan. 9, 2009, at $4.32, DOWN 56.8 percent from its initial offering price.

Bankers went on to price four IPOs in February 2003 and 84 for the full year.

There were two IPOs that scored opening-day moonshots -– an opening-day gain of 100 percent or more –- that came to market during the “insanity-dot-com” era. They were the MarketWatch.com and Neoforma.com deals.

On Jan. 15, 1999, MarketWatch.com, a New York City-based Internet news provider, priced 2.7 million shares at $17 each. The stock closed its opening day at $97.50, UP 473.5 percent from its initial offering price. On Jan. 24, 2005, Dow Jones & Company acquired MarketWatch for about $528 million, or $18 per share, UP $1 per share from its initial offering price, and a long way down from its first day’s close.

Bankers went on to price 13 IPOs in January 1999 and 543 for the full year.

On Jan. 24, 2000, Neoforma.com, a San Jose, California-based provider of business to business e-commerce services for medical products, supplies and equipment, priced 7 million shares at $17 each. The stock closed its opening day at $52.38 per share, UP 302.9 percent from its initial offering price. On March 3, 2006, Global Healthcare Exchange acquired Neoforma.com for $10 per share.

Bankers went on to price 16 IPOs in January 2000 and 431 for the full year.

This brings us back to the present and the wait for the year’s first IPO.

Disclaimer: A SCOOP Rating (Wall Street Consensus of Opening-day Premiums), is a general consensus taken, at press time, from Wall Street and investment professionals concerning how well an IPO might perform when it starts trading. The SCOOP Rating does not reflect the opinions of anyone associated with IPOScoop.com. The SCOOP ratings should not be taken as investment advice. The rating merely reflects the opinion of the professionals at the time of publication and is subject to last-minute changes due to market conditions, changes in a specific offering and other factors, such as changes in the proposed offering terms and the shifting of investor interest in the IPO. The information offered is taken from sources we believe to be reliable, but we cannot guarantee the accuracy.

Disclosure: Nobody on the IPOScoop.com staff has a position in any stocks mentioned above, nor do they trade or invest in IPOs. The IPOScoop.com staff does not issue advice, recommendations or opinions.